Britain is caught in the fallout of one of the biggest credit binges in recent history. Government figures point to 11% – and rising – of the UK population having problems repaying their debts. Citizens Advice reports a 20% increase in the number of people it is seeing. It's true that some people took out loans and products they shouldn't have, but it's becoming clear that many more were lent far too much, and often irresponsibly.

Although mortgage repossessions are not as high as expected, bankruptcies and insolvencies are, and unemployment is rising. A recent article in the Journal of Health Economics noted the link between rising debts and mental health problems, highlighting the wider impacts our indebted society is facing.

For the last few years, the government has funded debt advisers to provide the free face-to-face advice that people need to help them understand their financial situation and, more important, to help them negotiate with their creditors for manageable repayments and to give them the kind of support they need to make the necessary changes to live on their new budgets. Annually, more than 150,000 people receive this support and the Financial Inclusion Fund is the only dedicated government fund for providing free debt advice.

The money for this work has been promised until 2011. But the fund is within the Department for Business, Innovation and Skills, which has to make £1bn of cuts in the coming year, and no decision has been made on whether to continue free provision.

In this climate of austerity, two options have been suggested as cheaper on the public purse.

One is to provide debt advice over the telephone or online. A recent Public Accounts Committee report noted that telephone and web-based debt advice would be much cheaper to provide.

The internet and telephone do have a place in increasing outreach, but only 25% of people in need of debt advice have any interest in this kind of support, according to government analysis. And any adviser will tell you that if you're dealing with someone with multiple debts, a face-to-face meeting is about the only time you get a clear picture of what's going on and can engage with the problem. Advice seekers with boxes full of unopened letters from creditors are a common sight at Fair Finance.

The other option involves using the proposed national financial advice service as an alternative to debt advice. Financial advice focuses on everyday money matters. This can be from budgeting advice to information on financial products, welfare rights and tax issues. It will be sales-free and funded, most likely, from a levy on the finance industry, as noted in the coalition government's document on banking reform.

Undoubtedly, this would be a crucial service for many people thinking about their financial choices, savings and retirement and who need independent and trustworthy advice. It is not a very useful service, however, if you're facing eviction, have rising multiple debts, complex financial problems and bailiffs knocking at your door.

A national financial advice service would complement debt advice, but it is very different. One helps you choose financial products and the other helps you manage them if they go wrong.

The financial industry is expected to be asked to pay for a national financial advice service, I hope it will also be asked to pay for a national debt advice service. It seems right that the industry supports people in financial difficulty. If not, all the government will have done is to create a service funded by industry, and backed by government, to help you buy more of their financial products.

•Faisel Rahman is director of Fair Finance, a financial inclusion social enterprise.